Phoenix Industries has pulled off a miraculous recovery. Four years ago it was near bankruptcy. Today, it announced a $4 per share dividend to be paid a year from now, the first dividend since the crisis. Analysts expect dividends to increase by $1 a year for another 2 years. After the third year (in which dividends are $6 per share), dividend growth is expected to settle down to a more moderate long- term growth rate of 6%. If the firm's investors expect to earn a return of 16% on this stock, what must be its price? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Current price

Phoenix Industries has pulled off a miraculous recovery. Four years ago it was near bankruptcy. Today, it announced a $4 per share dividend to be paid a year from now, the first dividend since the crisis. Analysts expect dividends to increase by $1 a year for another 2 years. After the third year (in which dividends are $6 per share), dividend growth is expected to settle down to a more moderate long- term growth rate of 6%. If the firm's investors expect to earn a return of 16% on this stock, what must be its price? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Current price

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Module 6 Question 1 (Defining capital structure weights) Templeton Extended Care Facilities, Inc. is considering the acquisition of a chain of cemeteries owned by the Rosewood Corporation for $400 million. Since the primary asset of this business is real estate, Templeton's management has determined that they will be able to borrow the majority of the money needed to buy the business. The Rosewood Corporation has no debt financing, but Templeton plans to borrow $100 million and invest only $300 million in equity in the acquisition. What weights should Templeton use for debt and equity in computing the WACC for this acquisition? *Question attached
Everest Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product. Management expects earnings and dividends to grow at a rate of 34% for the next 2 years, 19.50% in year 3 and 4 and after which competition will probably reduce the growth rate in earnings and dividends to constant growth rate of 5.75%. The company’s last dividend was $1.60, its beta is 1.95, the market risk premium is 8.50%, and the risk-free rate is 6.50%. What is the current price of the common stock?Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72. A. $18.18 B. $14.91 C. $16.00 D. $19.64 E. $16.55
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Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $2.00 coming 3 years from today. The dividend should grow rapidly at a rate of 55% per year - during Years 4 and 5. After Year 5, the company should grow at a constant rate of 9% per year. If the required return on the stock is 15%, what is the value of the stock today? (Assume the market is in equilibrium with the required return equal to the expected return.) Do not round intermediate calculations. Round your answer to the nearest cent. $
Goodwin Technologies, a relatively young company, has been wildly successful but has yet to pay a dividend. An analyst forecasts that Goodwin is likely to pay its first dividend three years from now. She expects Goodwin to pay a $3.75000 dividend at that time (D, = $3.75000) and believes that the dividend will grow by 19.50000% for the following two years (D and D₂). However, after the fifth year, she expects Goodwin's dividend to grow at a constant rate of 3.96000% per year. Goodwin's required return is 13.20000%. Fill in the following chart to determine Goodwin's horizon value at the horizon date (when constant growth begins) and the current intrinsic value. To increase the accuracy of your calculations, do not round your intermediate calculations, but round all final answers to two decimal places. Term Horizon value Current intrinsic value Value If investors expect a total return of 14.20%, what will be Goodwin's expected dividend and capital gains yield in two years-that is, the…
Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $1.75 coming 3 years from today. The dividend should grow rapidly - at a rate of 55% per year - during Years 4 and 5. After Year 5, the company should grow at a constant rate of 5% per year. If the required return on the stock is 14%, what is the value of the stock today (assume the market is in equilibrium with the required return equal to the expected return)? Do not round intermediate calculations. Round your answer to the nearest cent.
Simpkins Corporation does not pay any dividends because it is expanding rapidly and needs to retain all of its earnings. However, investors expect Simpkins to begin paying dividends, with the first dividend of $1.25 coming 3 years from today. The dividend should grow rapidly - at a rate of 60% per year - during Years 4 and 5. After Year 5, the company should grow at a constant rate of 9% per year. If the required return on the stock is 13%, what is the value of the stock today (assume the market is in equilibrium with the required return equal to the expected return)? Do not round intermediate calculations. Round your answer to the nearest cent. DISCLAIMER: this is my second time posting this question (the answer is NOT $40.40) thank you!
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Everest Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product. Management expects earnings and dividends to grow at a rate of 28% for the next 2 years, 18.00% in year 3 and 4 and after which competition will probably reduce the growth rate in earnings and dividends to constant growth rate of 6.25%. The company’s last dividend was $1.00, its beta is 1.75, the market risk premium is 6.55%, and the risk-free rate is 4.50%. What is the current price of the common stock?Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72.
Everest Inc. is presently enjoying relatively high growth because of a surge in the demand for its new product. Management expects earnings and dividends to grow at a rate of 34% for the next 2 years, 21.45% in year 3 and 4 and after which competition will probably reduce the growth rate in earnings and dividends to constant growth rate of 6.50%. The company’s last dividend was $1.75, its beta is 1.15, the market risk premium is 9.70%, and the risk-free rate is 5.00%. What is the current price of the common stock? Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72.

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